Wednesday, February 26, 2014

Some preliminary thoughts on a complex situation.It doesn't take any special insight into the situation in Ukraine to conclude that no one narrative illuminates all the dynamics. Various contesting Grand Narratives have emerged in the media--neofascist coup, rampant corruption, east versus west, to name a few--but these only describe a few of the regional fault lines and complexities.At my request, correspondent A.C. offered a preliminary Deep State analysis of the situation. A.C.'s perspective is informed by decades of experience in Eastern Europe, Russia and the Baltic region.I recently discussed the Deep State in The Dollar and the Deep State, and offered this definition by Mike Lofgren:The term “Deep State” was coined in Turkey and is said to be a system composed of high-level elements within the intelligence services, military, security, judiciary and organized crime.The Deep State is a hybrid association of elements of government and parts of top-level finance and industry that is effectively able to govern the nation without reference to the consent of the governed as expressed through the formal political process.I describe the U.S. Deep State as the National Security State which enables a vast Imperial structure that incorporates hard and soft power--military, diplomatic, intelligence, finance, commercial, energy, media, higher education--in a system of global domination and influence.One key feature of the Deep State everywhere is that it makes decisions behind closed doors and the surface government simply ratifies and implements the decisions. I have covered various aspects of geopolitics and the Deep State for years, for example:The Great Game: Geopolitics and Oil (October 19, 2010)The Banality of Evil and Imperial Over-Reach (December 14, 2010)Speaking of Iraq--let's start with the obvious Deep State agenda in Ukraine: energy. Nations with a strategic "vital interest" in the region's energy mix include Ukraine, Russia, Poland, Germany (and the rest of the Europen Union, which currently depends on natural gas piped through Ukraine from Russia), Romania and (of course) the United States, which maintains a strategic interest in every square meter of the planet (including the seas and ice caps).It's not much of a stretch to say that Russia's fiscal health and geopolitical influence are based on hydrocarbons--specifically gas and oil delivered to other nations for cash and/or political favors.The maturation of fracking technologies have led to the exploration of western Ukraine, Poland and Romania by super-major oil companies such as Chevron:Where We Operate - Chevron

Chevron holds four shale concessions in Poland—Frampol, Grabowiec, Krasnik and Zwierzyniec—which total approximately one million acres. In the Grabowiec concession, drilling of the first well was completed in March 2012, followed by a diagnostic fracture integrity test in December 2012. A first well also was drilled in the Frampol concession in 2012. In the Zwierzyniec concession, drilling began in December 2012. Continued exploration drilling is planned for 2013.

Chevron holds more than 2 million acres in Romania, including a 1.6-million-acre concession in the Barlad Shale. We plan to drill an exploration well in 2013. We hold three additional concession agreements covering 670,000 acres in southeast Romania. Acquisition of 2-D seismic data across these concessions is expected to begin in 2013.

Chevron successfully bid for the right to exclusively negotiate with the government of Ukraine for the Oleska Block. The company is expected to operate and hold a 50 percent interest in the 1.6 million-acre concession.

The development of gas fields in these regions poses a direct competitive threat to the near-monopoly currently held by the Russian national oil company, Gazprom.This sets up a scramble for energy, where western Ukraine, Poland, Romania and the EU have powerful financial incentives to develop energy sources outside of Russian control, while Russia has an incentive to secure energy resources and assets in Eastern Ukraine and Crimea.Here is A.C.'s outline of some of the key dynamics:

This gas pipeline map graphically illustrates Gazprom's real problem. A major competing gas field is appearing literally underneath a major existing east-west gas pipeline running into central Europe. Drill wells and immediately begin selling to Germany and other existing Gazprom customers. And also undercut Gazprom's pricing by a touch.

The extent to which US-based multinational oil and gas firms are directly displacing Russian enterprises in supplying the EU is remarkable. Chevron and Exxon are very prominent in the emerging offshore and shale plays.

I think the imminent threat of Ukrainian shale gas development is a factor in forcing Putin's hand over the EU trade deal. Putin's regional Great Power ambitions are backed entirely by strong arm hydrocarbon diplomacy. Putin's domestic political position equally rests on stable and elevated hydrocarbon prices to fund the state budget.

He has no revolutionary ideology with mass appeal in religion, politics or economics. Nor does he possess a large internationally recognized sphere of dominance like Stalin obtained at Yalta in 1945.

Nor does he have a large land army with which to intimidate and subdue neighboring states. He's only managed to convert a portion of the shrunken Army to "kontraktniki" (well-paid professional volunteers). These guys are the ones suppressing the Muslim insurgents in the Caucasus. If Putin attempted to openly intervene in the Ukraine with the available and virtually untrained conscript military forces it would produce a political explosion in Russia's own internal politics. This is addition to the surge of Ukrainian nationalist opposition that would ensue.

Putin's risk arises not just from the example being set for Russian domestic opponents. If Putin is seen to be responsible for alienating and finally "losing" the Ukraine he'll find himself in trouble with the Russian Deep State.

As this piece notes, modern Ukraine in its present form is an artifact of the 1945 Yalta Conference and the post World War II order. Just like Yugoslavia. Unfortunately for all concerned, this latent instability is now compounded by a happenstance of geology and the recent maturation of the technology for exploiting shale gas reserves. Adjoining neighbors like Poland now have motives that were missing when the Ukraine was a poor and primarily agrarian land.

The gas pipeline map shows the major incentives and rational objectives of a partition strategy from Putin's perspective. He can't stop development in Polish Lublin or near Lviv. He at least needs to keep control of infrastructure in the eastern Ukraine. Offshore Black Sea oil and gas tract concessions are also at stake.

This suggests that the interests of all parties align in supporting a de facto partition rather than a civil war in Ukraine in which neither side could establish stable, long-term control of the other.I asked A.C. for his view of the U.S. Deep State's goals in the region.

The short two-part answer is:

1. Frustrate Moscow's ambitions to dominate Eurasia. The operative strategic analyses employed are MacKinder's World-Island Theory as subsequently and heavily modified by modern hydro-carbon fuel economics: The Geographical Pivot of History.

2. Continue to improve the EU's Central European position with respect to its hydrocarbon fuel supplies. The Neocons were already deeply worried about the growth of NATO dependence on Gazprom and the eastern pipelines in the mid-1980s. This has been on their radar for decades.

The overall objective is to destroy Putin's capacity to set marginal natural gas prices in Europe. If pipelines under the Baltic and Black Seas are feasible so are pipelines under the Mediterranean Sea from North Africa to France, and from the eastern Mediterranean and Aegean to Greece and southeastern Europe. Add some LPG terminals and European shale gas operations and this is achieved.

There may be a third goal in trying to set an example for domestic Russian opponents, which exist in great numbers. I think it's more likely the Russian Federation's Deep State will find another leader first.

Thank you, A.C., for your perspective on this complex, fast-evolving situation.Sometimes strategic goals can be met not by establishing overt control (i.e. becoming a target) but by indirectly thwarting the goals of competing Deep States.

The Nearly Free University and The Emerging Economy:The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economyWith the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.

It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?

We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.

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